Baltex, the Baltic Exchange’s regulated venue for block trade reporting, will close by 29 December 2017 (subject to all relevant regulatory approvals). During a meeting of the Board of Baltic Exchange Derivatives Trading Limited (BEDT) held on 21 July, it was decided that the company would apply to the Financial Conduct Authority (FCA) for permission to cease carrying out regulated activities. Baltex is authorised and regulated by the FCA as a multi-lateral trading facility (MTF).
The decision to cease Baltex’s operations came after a review of strategic options following LCH Clearnet’s (LCH) recent announcement to end its freight derivative clearing services, also by the end of the year. Launched in June 2011, Baltex is used by Forward Freight Agreement (FFA) brokers to ‘futurise’ their clients’ trades for clearing at LCH and in June 2017 processed its one millionth block future.
Baltex Chief Operating Officer Paul Stuart Smith said:
“In recent years, Baltex has provided a useful block trade reporting service for FFA brokers and LCH’s clearing members. As the Baltic Exchange’s regulated subsidiary, BEDT has played a valuable role in boosting the Baltic’s profile, particularly in building relationships with regulators. We have been the nexus of communication on behalf of the shipping market regarding specific aspects of regulatory changes including MiFID II and the Market Abuse Regulation.”
Baltic Exchange Chief Executive Mark Jackson said:
“Despite Baltex’s closure, the Baltic Exchange remains at the centre of the global FFA market and is steadfast in its support of it. Together with its members, particularly the FFA Brokers Association, the Baltic continues to work hard to promote the use of FFAs as a valuable hedging tool and to facilitate further growth of the FFA market around the world.”
Baltex will remain open until all open positions at LCH have either been closed out or have been novated to another clearing house.